Manufacturing hurt by shortage of quality applicants, CEO says

Caterpillar boss cites lack of education, competition from overseas

August 09, 2012|By Alejandra Cancino, Chicago Tribune reporter

Douglas Oberhelman, CEO of Caterpillar Inc., speaks Thursday in Chicago before participating in a discussion on the different roles government and businesses can play in creating jobs. (Heather Charles, Chicago Tribune)

Six of every 10 applicants for basic manufacturing jobs don't qualify because they lack a basic education or don't pass a drug test, Caterpillar Chief Executive Doug Oberhelman said Thursday in Chicago.

"We are customers to that education system that we see failing in this country and other competitors around the world are exceeding in their education system," said Oberhelman, whose company last year had revenue of $60 billion. The job-creation round table was sponsored by the National Conference of State Legislatures.

Edward Rust Jr., State Farm Mutual's chief executive, said the U.S. needs workers with verbal and written communication skills, people who can think critically and possess intellectual curiosity.

"The consequences of not addressing this are much greater than they appear, perhaps, today," Rust said.

This is not a problem that can be passed onto the next generation, Rust said, because skill sets become obsolete within five years. Workers have to continue upgrading their skills to keep up with the competition from abroad, he said.

Oberhelman also took a shot at higher education. "I, for one, struggle a little bit with a $250,000 education for a philosophy degree. They are a wonderful people but we can't employ philosophers in manufacturing in the United States. We need a one- or two-year technical add-on for a high school," Oberhelman said.

The panelists didn't take questions from the audience. They also discussed tax incentives offered by states to entice companies to expand or build facilities aimed at providing jobs. Illinois Gov. Pat Quinn has ramped up incentives in the last few years in an effort to compete with other states as well as foreign countries.

Oberhelman said incentives are not the determining factor on where the Peoria-based heavy equipment maker makes capital investments. His company's decision is based on what customers want and need with other factors ranging from the size of the skilled workforce, the location of its supply base, the infrastructure of the site as well as the general business climate.

As an example, Oberhelman pointed to a new Caterpillar plant in Victoria, Texas, that will make hydraulic excavators. The product was manufactured in Japan for decades. The decision to move production to the U.S., he said, was the result of wanting to be closer to equipment buyers, and to lower freight costs and shipping time from Asia.

Oberhelman acknowledged that talking about infrastructure was somewhat self-serving because the company sells earth-moving equipment. Still, he said he worried about the lack of spending in the U.S. to fix roads, bridges and ports.

"All of our competitors around the world, every country is investing more in infrastructure as a percentage of their GDP than we are,'' Oberhelman said. "And down the road our children and grandchildren will have to compete with that more and more.''

Caterpillar has nearly 133,000 full-time workers worldwide. About 55,400 work in the U.S.; roughly 25,000 are in Illinois and half of those are union members.

About 700 of the company's union workers at a hydraulics plant in Joliet have been on strike since May 1, pressing for cost-of-living wage increases, lower health care premiums and for the company to honor seniority rights. Caterpillar has described its proposal as fair. The sides have been deadlocked since June 27 and no talks are scheduled.